Established in 2008, this blog is an independent, common sense, look at challenges and opportunities in sports and financial investing, with occasional diversions as my mood takes me. I am not a tipster, nor is this a Profit and Loss report either. They are boring.

Wednesday, 8 March 2017

In what version of reality can most of these 'hedge fund professionals' referenced in the article below, possibly think they are deserving of any bonuses?

Sure, if the fund you are employed to work on beats its benchmark one year, why not reward this achievement, but if your investors would have been better off investing in a low cost index tracking fund, i.e your advice cost investors money, it's hard to see how you can reasonably justify your claim to a bonus, since you added nothing of value.

When it comes to gambling, there's an old saying:

“You can't win if you don't play”, or “You have to be in it to win it”

but there is a contradictory quote:

For most people, when it comes to gambling, they would be better served by following this latter advice, and when it comes to investing, they would be better off by following Warren Buffet's advice, and tracking the indexes.

Here's the article from the pages of CNBC:

Hedge funds, as a group, have a lower return than straight-up market indexes do. But professionals in the industry surveyed late last year still expected to take home better pay in 2016 than they did in 2015 — and an even greater portion think they deserve more.

A majority — 53 percent — of those surveyed said they expected to produce higher overall earnings for themselves in 2016 compared with 2015, according to the 10th annual Hedge Fund Compensation Report. That proportion is slightly lower than the year before, where 56 percent said they were expecting an increase in total compensation.

The report is based on information gathered in the fall from hundreds of partners, principals and employees from more than 200 of the largest hedge fund names, including Och-Ziff Capital and AQR Capital Management. The study also includes some of the smaller names that encompass a large portion of the industry.

That optimism on pay comes amid another lagging year in performance. The HFRI Fund Weighted Composite Index, which tracks various strategies of hedge fund performance, gained 5.45 percent during 2016. That compared with a 10.5 percent increase in the Standard & Poor's 500 index.

Still, the report showed a greater correlation between fund performance and bonus pay than in years' past. Expectations for those employees in firms with lower performance showed lower bonus expectations, and the opposite was true for employees at high-performing firms.

The report showed that among the highest earners, 80 percent of compensation is expected to come in the form of bonuses, which is consistent with prior years. That said, base pay for the highest levels continues to rise, according to the study.

Almost a third of respondents expected the same total compensation as last year, while only 19 percent said that their compensation would be smaller than last year.

"In view of the industry's lackluster average aggregate performance level, it is interesting that a majority of survey respondents still anticipate positive growth in their total compensation," the report said.

1 comment:

I have been considering tracking the indices with derivatives. Probably a CFD but not at market top. I don't have spare margin for any near term correction. After a downturn, going in with a 9 month contract and rolling it over at expiry for a number of years.

About Me

I have had a life-long interest in sports and after studying Pure Mathematics with Statistics at secondary school, have been fascinated by odds and probability.
The first system I came up with was a simple one - back the favourite and double up after a loss until a winner. Simple enough in theory, and I told my Dad about it. Not being a betting man himself, he ran it by some of his colleagues, and came home to tell me that it wouldn’t work because a long losing run would mean that the bank would be empty. Then there was always the possibility that the winner would be returned at odds-on, meaning that the total returns would not match the outlay. Not what a ten year old wants to hear! Only slightly daunted, I then went on a search for the Holy Grail, the secret to riches that I knew was out there somewhere. Finally in 2004 I stumbled across an article about Betting Exchanges and four years on I am able to make a steady profit. I am at that age where I can start thinking about retirement and anything I make from trading sports will bring that day forward.